Have you ever heard about stories where people – from individuals with low income, minorities to retirees – end up getting into deep financial trouble? If you look at their stories closely, you may notice that aside from the fact they all have money problems which got them into their predicament, they also have been victimized by one particular group.
They have many names in the financial industry, but many often call them simply as “loan sharks.”
What are these loan sharks? And am I at risk to these loan sharks when I find myself in a financial bind?
What are Loan Sharks?
Loan sharks are individuals or a group who offer lending services despite the fact they are not permitted to offer these services. They do not have the right permits from the financial department of the government – and in some cases, they have fake paperwork to make them look legitimate – and they do not follow the prescribed standards for the loans they offer.
It is common that the products of loan sharks come with high interests and come with outrageous policies to ensure they can charge more from their borrowers.
How to Spot Loan Sharks?
Loan sharks are basically illegal and since there are a lot of advertisements saying they are “licensed”, you can easily spot the fakes through the following factors:
- Interest rates
Unlike licensed moneylenders which follow the noted interest rates by the law, loan sharks have their own interest rates and they are usually higher than the standard rates. It can go as high as 100% for a simple small loan.
- Extra charges
Licensed moneylenders do not come with extra charges aside from late repayments and legal fees in case they have to recover the loan. For loan sharks, they add high extra charges which may not even be about the loan.
Licensed moneylenders will have the right licenses and documents that showcase that they are legitimate. You can even verify their accreditation through the official site of the government, such as the Ministry of Law Singapore.
For loan sharks, they will not be able to give you proof that they are legitimate. You also can’t verify their details with the government.
- Ease of application
Licensed moneylenders have a very easy and straight to the point loan application which only takes minutes to finish. You simply fill up the details, submit the right and required documentation and wait for the approval. Once approved, you can get the money through your bank account or you can get it from their offices.
However, for loan sharks, the applications will give you a headache because it is poorly written and not legally done by an attorney. They may even come with extra paperwork, which licensed moneylenders do not require. They may even give you a loan without documentation sent to them.
- Collecting Payments
Licensed moneylenders speak with borrowers with regards to their payment schedule, how much it should be and the details for late payments. They will politely remind borrowers through phone, email or text.
For loan sharks, they can use force and intimidation to make sure you pay them back once you are late even by just one day.
Risks in Making Deals with Loan Sharks
Since they are not licensed, loan sharks will follow their own rules to change your loan conditions to their advantage.
One of the areas where loan sharks will impose their own rules is in the late payments.
Like regular moneylenders, loan sharks also charge borrowers with late payment fees. However, their amounts are not within the prescribed late payment fees noted by the law.
Aside from late payments, loan sharks are also very scary when it comes to payment collection.
For licensed moneylenders, they will send a message to the borrower – either through text or phone call- to remind them that they have a payment due coming up. If the borrower has problems repaying, licensed moneylenders are open to talking to the borrower to change their repayment terms so long as the borrower explains their circumstances.
However, for loan sharks, they will harass and coerce the borrower to pay once they are late with their payments. Sometimes, their harassment may go over the top and threaten the borrowers if they do not pay immediately.
What Should You Do to Avoid Them?
When you need money, you simply just don’t borrow from loan sharks even if their offers are so appealing.
Before you apply for a personal loan from a moneylender, you need to double check if they are legitimate and if they are properly licensed as a lending company. You can check the licensed moneylenders in Singapore on the website of the Ministry of Law.
You can also consider the types of loans available to match your needs. Aside from personal loans, you can check out payday loans since it will give you the money you need immediately. However, you do need to pay the loan immediately when you do get paid and it has quite a high interest rate.
When you make your transaction with licensed moneylenders, you will not be harassed when it comes to paying your dues and they would even let you get flexible payment terms if you have problems with paying.
If you end up having a deal with a loan shark, don’t panic.
Record every message, information, and instance when these loan sharks have threatened you. Once you got everything together, file a police report with your pieces of evidence against these loan sharks to begin the legal process against them.
When you are in dire need of money, you should not immediately jump the gun and accept the first deal that would serve your needs without considering it. Always do your research before you accept anything because you may land yourself dealing with loan sharks and that never bodes well for anyone.
Have a little faith because there is a loan program there that will help you. Better be safe than sorry!